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Taxation of self-funded work-related training

Taxation of self-funded work-related training

The Government proposes to extend its support for self-funded training to encourage investment in skills and life-long learning. Comments are requested on its current objectives, and how the proposed changes should best be structured.

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The current rules for tax relief

Where employers pay, or reimburse, the costs of work-related training, this will usually be exempt from income tax and National Insurance Contributions (NIC).

However, where an employee bears the costs of work-related training directly, income tax and NIC relief is only available if:

  • They are obliged to incur those costs by reason of holding their employment (i.e. they are under a contractual obligation to do so); and
  • Those costs are incurred wholly, exclusively and necessarily in performing the duties of the employment.

Additionally, if an employee were to fund the costs of work-related training by sacrificing salary this would give rise to a taxable benefit equal to the salary foregone under the new rules on ‘optional remuneration arrangements’.

In practice, these conditions mean that relief in respect of the costs of self-funded work-related training is usually unavailable.

Consultation on extending support for training

The consultation does not set out any specific proposals. Instead, the Government invites comments on the most effective ways to meeting its key objectives of:

  • Supporting individuals to retain or upskill;
  • Ensuring the proposed support is targeted, sustainable and simple to administer; and
  • Learning from previous UK programmes (such as vocational training relief) and comparable overseas initiatives.

Encouragingly, the consultation states that the Government is open to innovative suggestions.

Next Steps

Responses to this consultation should be submitted to HMRC by 8 June 2018.

If you wish to suggest any points for inclusion in KPMG’s response, or have any queries, please contact your normal contact or e-mail us

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